We Need Investors

The latest inflation figures released this week reveals some softening in consumer spending on fuel, discretionary items and electricity. The treasurer labelled inflation ‘sticky’ – code for ‘still too high’ at 3.5% for the twelve months to July.

Rents are up 7% contributing to keeping inflation above the target band of 2-3%. Perth’s rents have stabilised over the past two months with median house rent at $650 per week, supply has crept up from last year and median days on market are beginning to rise. For context,

four years ago, house rents were $370 per week

The primary reason rents have risen so sharply is due to lack of adequate supply whilst demand -through increased population – has rapidly increased. Governments have very successfully shifted the blame for today’s housing affordability challenges away from their own housing policy failures and instead pointed the finger at property investors and the real estate agents that represent them. Politicians have very effectively shifted the narrative away from supporting private property investment to supply homes to the market whilst simultaneously blaming investors for spiralling rents and house prices. This is a remarkable achievement.

Like it or not, unsophisticated private investors – ordinary Australians – supply 27 percent of all homes in the nation to tenants. Government supply about 3 percent as social housing. It is fact that across Australia, 9 out of 10 rented homes are provided by private investors.

Yet, in this time of greatest need, with supply of rental homes at severe lows, there are few housing policies that seeks to encourage the investor cohort into supplying more homes. Instead, governments shun the idea of stamp duty reform, land taxes continue to rise and tenancy laws continue to swing in favour or tenants. Negative gearing and capital gains tax discounts are insufficient incentives to encourage enough investors to buy. Appealing tax settings and returns in superannuation funds, commercial property and syndicated funds offer ‘mum and dad’ investors an alternative to direct residential property investment.

Prior to 2014, the volume of investors buying residential homes to add to the rental pool, ran at a higher rate than those selling rented homes. Talk of changes to negative gearing tax laws from the then opposition, along with broader market factors, began to see this trend reverse. Nowadays, there are more rental homes nationally being sold than purchased.

In Victoria, thanks to rising land taxes and changes to tenancy laws, for every three tenanted properties sold, only one remains in the rental market. In WA, there are now 1,000 fewer tenancy bonds being held today by the Bond Administrator than in 2019. When investors are inactive in the market, it falls to government to provide the housing; something they have failed to do.

Put simply, governments – supported by the media and tenancy advocates – have been busily whacking investors, whilst simultaneously failing to provide enough rental housing for Australians as the only alternative to the private investor market. And, somehow, they’ve so far been able to get away with it.